Duke Energy seeks bigger role in solar market

Chief Executive Jim Rogers wants Duke Energy Corp. to become a major player in solar power in the Carolinas and elsewhere, with Duke’s unregulated renewable-energy business building projects for its utilities.

“This is a business we want to invest in — we want to earn off of it,” he says. “We don’t want to cede it to others.”

Rogers envisions Duke’s utilities turning a profit on solar development. And foresees the company’s commercial business, Duke Energy Renewables, competing to build projects for Duke utilities in the Carolinas, Florida and the Midwest.

In North Carolina, that will require a change of state utilities law, he acknowledges. The way utilities currently contract for renewable power poses major obstacles to “affiliate transactions” — business dealings by utilities with subsidiaries of the holding company that owns them.

The move also will require regulatory changes, such as allowing Duke Energy Carolinas and Duke Energy Progress to build more rooftop solar projects. State regulators strictly limited the amount of solar capacity Duke could install in its initial program to build and maintain solar panels on property it rents from customers.

Rogers wants to see those restrictions loosened or taken off entirely. “We would like the ability to add solar to the rooftop within our regulated business and treat it in the same way we treat coal, nuclear and gas” power plants, he says.

An important step in this effort will be proposed to the N.C. Utilities Commission by mid-July.

Duke will file for permission to establish a new renewable-energy rate — called a tariff — for large industrial customers.

Duke’s proposal was part of a package that persuaded Google Inc. to build a second $600 million data center in Lenoir. Google wants all of its data centers to have a zero-carbon footprint. It pressed Duke to develop a program through which it could buy energy produced from renewable, non-carbon sources.

Lowell Sachs, director of communication for the N.C. Sustainable Energy Association, calls Rogers’ solar plans “a recognition of the importance of the role that renewables play in the energy industry in the state.”

His group expressed reservations about Duke’s rooftop solar plan when the company proposed it in 2009, convincing regulators to limit its size. Sachs says the association cannot comment specifically on Duke’s latest plans until it sees the details.

But he welcomed the general principles Rogers expressed.

“Healthy competition is a good thing,” he says. “And renewables can play an important part in creating that kind of healthy and robust competition for utilities.”

Duke will provide full details of the proposed tariff when it submits the plan to regulators in late May. But Rogers filled in some details during a recent interview.

The basic idea is to offer electricity largely from solar energy to large customers willing to contract for clean power at a higher price than power from Duke’s normal operations.

A key provision for Duke: being allowed to make its standard 10.5% return on equity for investments in renewable projects for the clean-energy contracts.

With Duke’s expertise in building solar systems, the contracts would be competitively priced and should appeal to customers such as Google that want to use a greener source of power, Rogers says.

The contracts also would include backup electricity for times when solar power is unavailable.

Some of that power could come from expanding Duke’s rooftop solar program. The company has about 10 megawatts of solar capacity installed on rooftops and other property it leases from customers. Duke operates the disparate projects — ranging from 65 kilowatts to 2.1 megawatts, scattered across its N.C. service area — as if they were a single power plant.

Duke created that program in 2009. The company initially sought to build 20 megawatts of capacity at a cost of $100 million, but the Utilities Commission cut that in half.

Rogers says regulators should now remove the limits. He notes Duke has proved it can build the capacity at a low cost (the project came in under budget). And using such capacity for the proposed clean-energy rate would protect customers, he says. In addition, that would protect against any cost increases from the production of solar power, which still costs more to generate than Duke’s power from nuclear, coal, natural gas and hydroelectric plants.

But Rogers also wants Duke to be able to contract for solar-power production with developers under the clean-energy program and provide that electricity to industrial customers.

Under current state policy, Duke is not allowed to make any profit on the power it buys from renewable-energy developers for resale.

Rogers would like for Duke Energy Renewables to be able to compete with those developers.

Duke Renewables has more than 40 megawatts of solar capacity under construction or proposed in North Carolina. All of that power will be sold to municipal power companies in the eastern part of the state.

Rogers says Duke will seek to persuade legislators and regulators to change the rules and give the company greater flexibility in the solar market.

“We have experience at building solar, and we’ve been very successful at doing it,” he says. “We want to compete if it’s going to be built in North Carolina.”